Investa is one of Australia's largest commercial real estate companies. Founded in 2000 it has more than 300 staff and $10 billion in assets under management. In 2007, it was bought by Morgan Stanley Real Estate Funds, which funded the purchase with borrowed money. Scott MacDonald, a seasoned American executive with 40 years of experience working and managing commercial real estate companies, agreed to visit Sydney for a week in 2008 to advise Investa investors. He returned home more than five years later after a stint as the company's chief executive. This is an extract from Saving Investa by Scott MacDonald (Xoum, $29.99).
It seems that there is no end of books promising success and riches by adopting one scheme or another. In real estate, the get-rich schemes usually involve borrowing more money than is reasonable or prudent, and planning to never experience any setbacks or problems.
My experience is that there is no substitute for a commitment to hard work, careful planning, and good organisation.
1. Don't expect anyone to give you anything.
I cannot remember a period of time when I did not work. After my father died, I had specific chores at home. In grade school and junior high school, I did yard work for neighbours, had a paper route, and washed dishes at my junior high.
In high school, I bagged groceries, stocked shelves in a neighbourhood pharmacy, and worked in a fibreglass factory.
A key lesson from decades of work is as follows: If you need or want something, work for it. You will appreciate it more and not be indebted to anyone.
2. It is important to pick a job not based on immediate compensation but on how it prepares you to realise future opportunities.
My first job after graduate school was with Gladstone Associates in Washington, DC. Gladstone was a prestigious management consulting firm specialising in real estate. I was fortunate to get a job there and, in fact, turned down other, initially more lucrative jobs for the opportunity to work at Gladstone. Like all top quality professional service firms, the hours were very long but the breadth of learning was incredible. Typically, I worked 12- to 14-hour days, six days a week, and juggled five to 10 assignments concurrently. I learned more about real estate in five years at Gladstone than I could have learned in more than 10 years elsewhere. I have always learned of jobs through personal contacts, which I believe is typical. I have been offered jobs based on favourable impressions of people familiar with my work. I have never had a job offer based on submission of a résumé or request for an interview. As a corporate CEO, I have received many résumés, probably thousands during my career. I do not recall ever hiring someone because of an unsolicited résumé I received. Sending out résumés is generally useless, in my experience, unless it is for a first job that requires no experience.
3. No matter how important the project, life is too short to have to deal with assholes.
I had a "no assholes" rule at Center America Property Trust and subsequent companies. If someone cannot deal with you professionally and ethically, just pass on the deal and move on. There will be other deals.
I may have lost an occasional deal but overall my companies enjoyed good success and reputation, which led to other and better opportunities.
4. Be a good listener.
You never learn anything when you are talking. You only learn when others talk and you listen. Sometimes I tell my staff when we are about to go into an important meeting, "Please resist the temptation to talk."
Being a good listener is an art. Understanding what the key issues and priorities are of those you are meeting with should lead to better agreements and outcomes.
5. It is important to recognise change and get ahead of the change curve. Too many are focused on the rearview mirror rather than the road ahead.
The status quo develops its own constituency who benefit from keeping things the way they are. Yet, successful people find a way to implement change. I have been told, "You cannot do that," hundreds of times but when change is the correct path, I generally find a way to go there. Successful people do not merely follow the path of others; they lead, often in new and challenging directions.
It is also important to recognise changing conditions and make personal adjustments in anticipation of such changes. I joined Barton-Aschman Associates, a consulting firm, in 1978. Much of my work there was providing financial and market-research services to shopping center developers.
However, in the early 1980s, major shopping mall developers began to hire market and financial staff rather than rely on consultants, and I realised my primary – although not exclusive – practice area would become a declining business for consultants.
When the Hahn Company called and offered me a job to organise their market and financial research, I accepted, although it meant moving the family from Evanston, which we loved, to distant San Diego.
A couple of years after I resigned from Barton-Aschman, a larger engineering firm from California acquired the firm. My former research group was terminated. If I had remained in Evanston, I would most likely have been unemployed at a time when our family needs were great.
6. In competitive markets, decision-making should be localised.
Corporate bureaucracy smothers innovation, slows speed to market, and ultimately leads to failure.
The corporate bureaucracy associated with my tenure at W.R. Grace Properties meant real estate decisions were made too slowly, giving advantage to local, more nimble competitors. This inability to react quickly and the reliance on accounting tricks led to the demise of the Grace subsidiary in my judgment.
At Plaza Properties, Center America, and New Plan, I instituted localised decision-making, which resulted in significant increases in performance.
Generally, locally-based staffs are better positioned to make correct local decisions than faraway corporate executives or centralised organisation bosses. Good financial controls and excellent communication technology are keys to decentralised decision models.
7. One important key to personal business success is to develop an expertise in something that adds value and others do not have.
I became the expert at Hahn in market research – including being able to predict the sales of future shopping centers to be developed, based on local demographic models we developed with the help of a statistician. With new personal computers and advanced budgeting models, I could also determine the likely financial impact of proposed property investments. The company did not make an investment decision without consulting me. With a unique expertise, I was able to branch out and take on related responsibilities. Soon I was in charge of all new investments for Hahn including acquisitions and new development. As head of new business, I was involved in key corporate executive discussions.
8. Not everything in business is fair.
After turning around Plaza Properties of America and then transforming the Hahn Company as acting CEO, I expected to be promoted to CEO of Hahn. However, the Hahn Company's corporate owner, Trizec, was acquired by another company during this time.
A new Trizec board member, Jerry O'Connor, recommended a friend of his to be CEO of Hahn. Most of the new board did not know me and followed Jerry's recommendation. I resigned as COO a couple months later. I believed the decision was unfair to me, and a shock to staff and industry colleagues, but I needed to move on and focus on the future.
Chris Niehaus of Morgan Stanley called and offered me the job of CEO of a company Morgan Stanley had acquired in Houston, Tex- as. It was another corporate turnaround assignment, and I accepted the offer and became CEO of Center America Property Trust in 1995.
After my departure, the Hahn Company (then called Trizec Hahn Centers) lost about $1 billion in poorly conceived and executed projects, and the Hahn Company's assets were sold and the company was closed.
9. To achieve success, sacrifice is often required, and the family bears the greatest burden.
After I was passed over for the Hahn CEO position, I could not stay there and work for the new CEO. My wife understood this, although the move from San Diego was a major sacrifice for her and my sons, Andrew and Ross. Jill was president of the local school board, Andrew was about to enter high school, and Ross's best friend and cousin lived a block away. No one wanted to move to Houston, but the family supported me.
We did achieve success at Center America and the family adjusted well to life in Houston. If I had stayed at Hahn and in San Diego, I almost certainly would have found myself unemployed with considerable expenses and limited prospects when the company closed a few years later.
10. It is easier to achieve great success when starting from a low level of performance and opportunities are generally more available in underperforming and poorly performing companies.
In such situations, however, it is important to negotiate a favourable contract to insure you participate fully in the upside if you do achieve success.
Most people want to work for a successful company, but opportunities may actually be better elsewhere. When I took the reins of Center America in 1995, the company was losing money at a rapid rate, and the properties were worse than I had imagined. If I had not had family responsibilities then, I probably would have quit six months after starting. Things were bleak.
Eventually, with lots of hard work, long hours, and Morgan Stanley capital, the corporate ship began to turn. I replaced most of the staff in the first year, set up new systems and programs, relocated the firm to new office space, and created a professional work environment.
Gradually, the company began to generate positive cash flow. I also negotiated a very favourable employment agreement for myself and favourable financial incentive programs for key staff. In late 2001, we agreed to sell Center America to New Plan Excel Realty Trust and that made all of the hard work and late night worries at Center America worthwhile.
Financially, my family was more secure than it had ever been. The transaction was a win for the investors, the seller, the buyer, Center America employees, and for the MacDonald family.
In high school, I bagged groceries, stocked shelves in a neighbourhood pharmacy, and worked in a fibreglass factory.
A key lesson from decades of work is as follows: If you need or want something, work for it. You will appreciate it more and not be indebted to anyone.
2. It is important to pick a job not based on immediate compensation but on how it prepares you to realise future opportunities.
My first job after graduate school was with Gladstone Associates in Washington, DC. Gladstone was a prestigious management consulting firm specialising in real estate. I was fortunate to get a job there and, in fact, turned down other, initially more lucrative jobs for the opportunity to work at Gladstone. Like all top quality professional service firms, the hours were very long but the breadth of learning was incredible. Typically, I worked 12- to 14-hour days, six days a week, and juggled five to 10 assignments concurrently. I learned more about real estate in five years at Gladstone than I could have learned in more than 10 years elsewhere. I have always learned of jobs through personal contacts, which I believe is typical. I have been offered jobs based on favourable impressions of people familiar with my work. I have never had a job offer based on submission of a résumé or request for an interview. As a corporate CEO, I have received many résumés, probably thousands during my career. I do not recall ever hiring someone because of an unsolicited résumé I received. Sending out résumés is generally useless, in my experience, unless it is for a first job that requires no experience.
3. No matter how important the project, life is too short to have to deal with assholes.
I had a "no assholes" rule at Center America Property Trust and subsequent companies. If someone cannot deal with you professionally and ethically, just pass on the deal and move on. There will be other deals.
I may have lost an occasional deal but overall my companies enjoyed good success and reputation, which led to other and better opportunities.
4. Be a good listener.
You never learn anything when you are talking. You only learn when others talk and you listen. Sometimes I tell my staff when we are about to go into an important meeting, "Please resist the temptation to talk."
Being a good listener is an art. Understanding what the key issues and priorities are of those you are meeting with should lead to better agreements and outcomes.
5. It is important to recognise change and get ahead of the change curve. Too many are focused on the rearview mirror rather than the road ahead.
The status quo develops its own constituency who benefit from keeping things the way they are. Yet, successful people find a way to implement change. I have been told, "You cannot do that," hundreds of times but when change is the correct path, I generally find a way to go there. Successful people do not merely follow the path of others; they lead, often in new and challenging directions.
It is also important to recognise changing conditions and make personal adjustments in anticipation of such changes. I joined Barton-Aschman Associates, a consulting firm, in 1978. Much of my work there was providing financial and market-research services to shopping center developers.
However, in the early 1980s, major shopping mall developers began to hire market and financial staff rather than rely on consultants, and I realised my primary – although not exclusive – practice area would become a declining business for consultants.
When the Hahn Company called and offered me a job to organise their market and financial research, I accepted, although it meant moving the family from Evanston, which we loved, to distant San Diego.
A couple of years after I resigned from Barton-Aschman, a larger engineering firm from California acquired the firm. My former research group was terminated. If I had remained in Evanston, I would most likely have been unemployed at a time when our family needs were great.
6. In competitive markets, decision-making should be localised.
Corporate bureaucracy smothers innovation, slows speed to market, and ultimately leads to failure.
The corporate bureaucracy associated with my tenure at W.R. Grace Properties meant real estate decisions were made too slowly, giving advantage to local, more nimble competitors. This inability to react quickly and the reliance on accounting tricks led to the demise of the Grace subsidiary in my judgment.
At Plaza Properties, Center America, and New Plan, I instituted localised decision-making, which resulted in significant increases in performance.
Generally, locally-based staffs are better positioned to make correct local decisions than faraway corporate executives or centralised organisation bosses. Good financial controls and excellent communication technology are keys to decentralised decision models.
7. One important key to personal business success is to develop an expertise in something that adds value and others do not have.
I became the expert at Hahn in market research – including being able to predict the sales of future shopping centers to be developed, based on local demographic models we developed with the help of a statistician. With new personal computers and advanced budgeting models, I could also determine the likely financial impact of proposed property investments. The company did not make an investment decision without consulting me. With a unique expertise, I was able to branch out and take on related responsibilities. Soon I was in charge of all new investments for Hahn including acquisitions and new development. As head of new business, I was involved in key corporate executive discussions.
8. Not everything in business is fair.
After turning around Plaza Properties of America and then transforming the Hahn Company as acting CEO, I expected to be promoted to CEO of Hahn. However, the Hahn Company's corporate owner, Trizec, was acquired by another company during this time.
A new Trizec board member, Jerry O'Connor, recommended a friend of his to be CEO of Hahn. Most of the new board did not know me and followed Jerry's recommendation. I resigned as COO a couple months later. I believed the decision was unfair to me, and a shock to staff and industry colleagues, but I needed to move on and focus on the future.
Chris Niehaus of Morgan Stanley called and offered me the job of CEO of a company Morgan Stanley had acquired in Houston, Tex- as. It was another corporate turnaround assignment, and I accepted the offer and became CEO of Center America Property Trust in 1995.
After my departure, the Hahn Company (then called Trizec Hahn Centers) lost about $1 billion in poorly conceived and executed projects, and the Hahn Company's assets were sold and the company was closed.
9. To achieve success, sacrifice is often required, and the family bears the greatest burden.
After I was passed over for the Hahn CEO position, I could not stay there and work for the new CEO. My wife understood this, although the move from San Diego was a major sacrifice for her and my sons, Andrew and Ross. Jill was president of the local school board, Andrew was about to enter high school, and Ross's best friend and cousin lived a block away. No one wanted to move to Houston, but the family supported me.
We did achieve success at Center America and the family adjusted well to life in Houston. If I had stayed at Hahn and in San Diego, I almost certainly would have found myself unemployed with considerable expenses and limited prospects when the company closed a few years later.
10. It is easier to achieve great success when starting from a low level of performance and opportunities are generally more available in underperforming and poorly performing companies.
In such situations, however, it is important to negotiate a favourable contract to insure you participate fully in the upside if you do achieve success.
Most people want to work for a successful company, but opportunities may actually be better elsewhere. When I took the reins of Center America in 1995, the company was losing money at a rapid rate, and the properties were worse than I had imagined. If I had not had family responsibilities then, I probably would have quit six months after starting. Things were bleak.
Eventually, with lots of hard work, long hours, and Morgan Stanley capital, the corporate ship began to turn. I replaced most of the staff in the first year, set up new systems and programs, relocated the firm to new office space, and created a professional work environment.
Gradually, the company began to generate positive cash flow. I also negotiated a very favourable employment agreement for myself and favourable financial incentive programs for key staff. In late 2001, we agreed to sell Center America to New Plan Excel Realty Trust and that made all of the hard work and late night worries at Center America worthwhile.
Financially, my family was more secure than it had ever been. The transaction was a win for the investors, the seller, the buyer, Center America employees, and for the MacDonald family.
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